1.
Sushi Company owns 30,000 ordinary shares of Sashimi Company acquired on July 31, 2009, at a total cost of P1,100,000. On December 1, 2009, Sushi received 30,000 stock rights from Sashimi. Each right entitles the holder to acquire one share at P45. The market price of Sashimi's share on this date, ex-right, was P50 and the market price of each right was P5. Sushi sold its rights the same date at P5 a right less a P10,000 commission. The gain from the sale of the rights should be reported by Sushi at:
A. 
B. 
C. 
D. 
2.
On January 1, 2009, Fork Company
purchased 50,000 ordinary shares of Ovaltine Company for P3,600,000. On
December 31, 2009, Fork received 50,000 stock rights from Ovaltine.
Each right entitles the holder to acquire on share for P85. The market
price of Ovaltine's share was P100 immediately before the rights were
issued, and P90 a share immediately after the rights were issued. Fork
sold its rights on December 31, 2009 for P10 a right. Fork's gain from
the sale of the rights is:
A. 
B. 
C. 
D. 
3.
Eve Company owns 50,000 ordinary shares
of Blend Company, which has several hundred thousand shares publicly
traded. These 50,000 shares were purchased by Eve in 2007 for P100 per
share. On August 30, 2009, Blend distributed 50,000 stock rights to
Eve. Eve was entitled to buy one new share of Blend Company for P90
cash and two of these rights. On August 30, 2009, each share had a
market value of P 132 ex-right, and each right had a market value of
P18. What cost should be recorded for each new share that Eve acquired
by exercising the rights?
A. 
B. 
C. 
D. 
4.
An investment of $3,000 is made at a simple annual interest of 5%. How much must additional money be invested at an annual simple interest rate of 8% so that the total annual interest earned is 7.5 of the original amount you invested?
A. 
B. 
C. 
D. 
5.
A total of $6000 is invested in two accounts. The interest rate on one account is 9%; on the second account, the interest rate is 6%. How much should be invested in each account so both accounts earn the same annual interest?
A. 
B. 
C. 
D. 
6.
On February 15, 2009, Bart Company
purchased 20,000 shares of Homer Company's newly issued 6% cumulative
P75 par preference share capital for P1,520,000. Each share carried one
detachable share warrant entitling the holder to acquire at P10, one
ordinary share of Homer Company. On February 15, 2009, the market price
of the preference share ex-warrant was P72 and the market price of the
share warrant was P8. On December 31, 2009, Bart sold all the share
warrants for P205,000. The gain on the sale of the share warrants was:
A. 
B. 
C. 
D. 
7.
Three Kings Company invested in shares of Eastern Company acquired as follows: NUMBER OF SHARES COST2007 22,500 1,800,0002008 37,500 3,300,000In
2009, Three Kings Company received 60,000 rights to purchase Eastern
share at P80. Five rights are required to purchase one share. At issue
date, rights has a market value of P4 each and share was selling
ex-right at P96. Three Kings Company used rights to purchase 9,000
additional shares of Eastern Company and allowed the rights not
exercised to lapse. In determining the stock rights exercised, assume
the use of the first-in, first-out method. The amount to be debited to
investment account for the purchase of the 9,000 additional shares is:
A. 
B. 
C. 
D. 
8.
On January 1, 2009, Kent Company
purchased 20% of Luther Company's ordinary shares outstanding for
P6,000,000. During 2009, Luther reported net income of P7,000,000 and
paid cash dividend of P4,000,000. The balance in Kent's investment in
Luther Company account at December 31, 2009 should be:
A. 
B. 
C. 
D. 
9.
On January, 1 2008, Wayne Company bought
15% of Parrot Company's ordinary shares outstanding for P6,000,000.
Wayne appropriately accounts for this investment by the cost method.
The following data concerning Parrot are available for the years ended
December 31, 2008 and 2009: 2008 2009Net income 3,000,000 9,000,000Cash dividend paid None 10,000,000In its income statement for the year ended December 31, 2009, how much should Wayne report as income from this investment?
A. 
B. 
C. 
D. 
10.
On January 1, 2008, Tough Company
acquired 10% of Complex Company's ordinary shares outstanding for
P6,000,000. Tough appropriately accounts for this investment by the
cost method. Complex Company reported the following for the years ended
December 31, 2008 and 2007: NET INCOME CASH DIVIDEND2008 400,000 02009 1,200,000 1,800,000In its income statement for the year ended December 31, 2009, Easy Company should report dividend income at:
A. 
B. 
C. 
D. 
11.
In January 2009, Fatty Company acquired
20% of the outstanding ordinary shares of David Company for P8,000,000.
This investment gave Fatty the ability to exercise significant
influence over David. The book value of the acquired shares was
P6,000,000. The excess of cost over book value was attributed to a
depreciable asset which was undervalued on David's balance sheet and
which had a remaining useful life of ten years.For the year
ended December 31, 2009, David reported net income of P1,800,000 and
paid cash dividends of P400,000 and thereafter issued 5% stock
dividend. What is the proper carrying value of Fatty's investment in
David at December 31, 2009?
A. 
B. 
C. 
D. 
12.
On January 1, 2009, Bell Company paid
P18,000,000 for 50,000 ordinary shares of Base Company which represent
a 25% interest in the net assets of Base. The acquisition cost is equal
to the book value of the net assets acquired. Bell has the ability to
exercise significant influence over Base. Bell received a dividend of
P35 per share from Base in 2009. Base reported net income of P9,600,000
for the year ended December 31, 2009. In its December 31, 2009 balance
sheet, Bell should report the investment in Base Company at:
A. 
B. 
C. 
D. 
13.
On January 1, 2009, Weller Company
purchased 10% of Pea Company's outstanding ordinary shares for
P4,000,000. Weller is the largest single shareholder in Pea and
Weller's officers are a majority of Pea's board of directors. Pea
reported net income of P5,000,000 for 2009 and paid dividends of
P1,500,000. In its December 31, 2009 balance sheet, what amount should
Weller report as investment in Pea?
A. 
B. 
C. 
D. 
14.
On January 1, 2009, Dryer Company
acquired as a long-term investment a 20% ordinary share interest in
Epson Company. Dryer paid P7,000,000 for this investment when the fair
value of Epson's net assets was P35,000,000. Dryer can exercise
significant influence over Epson's operating and financial policies.
For the year ended December 31, 2009, Epson reported net income of
P4,000,000 and declared and paid cash dividends of P1,600,000. How much
revenue from this investment should Dryer report for 2009?
A. 
B. 
C. 
D. 
15.
On July 1, 2009, Dino Company purchased
30,000 shares of Mammoth Company's 100,000 outstanding ordinary shares
for P200 per share. On December 15, 2009, Mammoth paid P400,000 in
dividends to its ordinary shareholders. Mammoth's net income for the
year ended December 31, 2009 was P1,200,000, earned evenly throughout
the year. In its 2009 income statement, what amount of income from this
investment should Dino report?
A. 
B. 
C. 
D. 
16.
On April 1, 2009, Zen Company purchased
40% of the outstanding ordinary shares of Ying Company for P10,000,000.
On that date, Ying's net assets were P20,000,000 and Zen cannot
attribute the excess of the cost of its investment in Ying over its
equity in Ying's net assets to any particular factor.Ying's
2009 net income is P5,000,000. Zen plans to retain its investment in
Ying indefinitely. Zen accounts for its investment in Ying by the
equity method. The maximum amount which could be included in Zen's 2009
income before tax to reflect Zen's "equity in net income of Ying" is:
A. 
B. 
C. 
D. 
17.
On January 1, 2009, Ron Company purchased
40% of the outstanding ordinary shares of Kim Company, paying
P6,400,000 when the book value of the net assets of Kim Company equaled
P12,500,000. The difference was attributed to equipment which had a
book value of P3,000,000 and a fair market value of P5,000,000 and to
building which had a book value of P2,500,000 and a fair value of
P4,000,000. The remaining useful life of the equipment and building was
4 years and 12 years, respectively. During 2009, Kim Company reported
net income of P5,000,000 and paid dividends of P2,500,000. Ron Company
shall report investment income for 2009 at:
A. 
B. 
C. 
D. 
18.
On January 1, 2009, Ken Company purchased
30% interest in Barbie Company for P2,500,000. On this date Barbie's
shareholders' equity was P5,000,000. The carrying amounts of Barbie's
identifiable net assets approximated their fair values, except for land
whose fair value exceeded its carrying amount by P2,000,000. Barbie
reported net income of P1,000,000 for 2009 and paid no dividends. Ken
accounts for this investment using the equity method. In its December
31, 2009 balance sheet, what amount should Ken report as investment in
associate?
A. 
B. 
C. 
D. 
19.
Seed Company bought 40% of Adam Company's
outstanding ordinary shares on January 1, 2009, for P4,000,000. The
carrying amount of Adam's net assets at the purchase date totaled
P9,000,000. Fair values and carrying amounts were the same for all
items except for plant and inventory, for which fair values exceeded
their carrying amounts by P900,000 and P100,000, respectively. The
plant has an 18-year life. All inventory was sold during 2009. During
2009, Adam reported net income of P1,200,000 and paid a P200,000 cash
dividend. What amount should Seed report in its income statement from
its investment in Adam for the year ended December 31, 2009?
A. 
B. 
C. 
D. 
20.
On January 1, 2009, Annie Company
purchased 20% of the outstanding ordinary shares of Duke Company for
P4,000,000 of which P1,000,000 was paid in cash and P3,000,000 is
payable with 12% annual interest on December 31, 2010. Annie also paid
P500,000 to a business broker who helped find a suitable business and
negotiated the purchase.At the time of acquisition, the fair
value of Duke's identifiable assets and liabilities were equal to their
carrying values except for an office building which had a fair value in
excess of book value of P2,000,000 and an estimated life of 10 years.
Duke's shareholders' equity on January 1, 2009 was P 13,000,0000.During
2009, Duke reported net income of P5,000,000 and paid dividend of
P2,000,000. What amount of income should Annie Company report for 2009
as a result of the investment?
A. 
B. 
C. 
D.